Toys “R” Us is frequently a topic in the news. Since the toy giant filed for Chapter 11 bankruptcy in September of 2017, the fate of the company has been up in the air.
In March the company announced its plans to shut down operations in the U.S. and Puerto Rico. All Toys “R” Us and Babies “R” Us stores are closing.
The toy retailer filed for Chapter 11 bankruptcy in an effort to reorganize its debt load. Chapter 11 bankruptcy is designed for businesses seeking to restructure and create a repayment plan to pay back its debts over time. While Chapter 11 has the power to help a company avoid liquidation and having to shut down completely, it is not always successful.
At the time of filing, Toys “R” Us was more than $5 billion in debt. The expenses of carrying that much debt was roughly $400 million a year. Just days after filing, the company announced that it had access to $3 billion in bankruptcy financing, which it planned to use to restructure the company, alleviate its debt burden, and revamp its stores. There was also speculation that the company would be bought by another company as part of the bankruptcy proceedings.
The turn-around the company hoped for did not happen. In a January bankruptcy court filing the company reported holiday season earnings that fell far below worst case projections. In the fourth quarter of last year, Toys “R” Us earned $81 million in pre-tax profit―which was $250 million below the company’s target and a quarter of what it earned just one year earlier in Q4 of 2016.
All Toys “R” Us and Babies “R” Us Stores Closing
The brick and mortar stores are in the process of liquidating their inventory. Toys “R” Us and Babies “R” Us gift cards expired in April. Sales on the Toys “R” Us website have already been shut down. Visitors to the site are greeted with a pop-up box notifying them that they can no longer make purchase from the site. The statement reads:
“Thanks for visiting. We have shut down the website for any purchases but our brick and mortar stores are open and holding going out of business sales. You can keep up-to-date with the sale at https://toysrusclosingsale.com and liquidation-going-out-of-business-FAQs. We encourage you to stop by your local store and take full advantage of the deep discounts and deals available. Thank you for your business and support over the years.
Sincerely, Toys “R” Us and Babies “R” Us teams.“
Though Chapter 11 bankruptcy could not save Toys “R” Us, it is not uncommon for Chapter 11 bankruptcy filings to save a company. A number of well known corporations have sought the protections and benefits of Chapter 11 bankruptcy. For example, Chrysler filed in 2009 and American Airlines in 2012. If you’re interested in learning more about business bankruptcy, Business Insider compiled an interesting review of The 11 Largest Bankruptcies In American History.
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